Exploring Which Stakeholders Stand To Benefit Most From NHIA


It’s a painful reality: The cost of homes is putting homeownership beyond the reach of a growing share of Americans.

A new bill called The Neighborhood Homes Investment Act (NHIA) strives to address this problem, encouraging affordable home building and spurring renewal of distressed neighborhoods through the creation of a new tax credit.

By supporting affordable housing initiatives through tax credits, The American Bankers Association (ABA)-backed NHIA would work much like the Low-Income Housing Tax Credit (LIHTC). Developers or investors would receive the tax credits, which would lessen their federal tax liability, in return for building or renovating housing properties.

“On the surface, the ABA’s endorsement paints a picture of community-focused growth,” says Brian Pillmore, founder and CEO of Oklahoma City, Okla.-based Visbanking, which offers banking tools and services.

“A deeper dive reveals that many of its members could significantly benefit. This is a matter of great importance to the banking industry, particularly those who are involved in housing transactions as sponsors or lenders. The NHIA’s successful implementation could increase their transaction volume, allowing them to earn more interest and fees. “It’s important to contrast this backing with the wider implications and beneficiaries of the Act.” Pillmore says it’s more difficult to turn this rich potential into reality. There’s little question the tax credit could attract development to the distressed areas where it is needed the most, and where the credits would be focused.

However, according to Pillmore, “There’s a looming shadow: The interests of financial behemoths. These credits can be leveraged by banks and developers, who have a large financial reach. Thus, while we might witness a cosmetic revival of neighborhoods, the deep-rooted challenges of housing affordability might remain largely unaddressed.”

The NHIA is touted as advancing the cause of housing affordability and galvanizing community investment, both of which augur a more hopeful future for housing in distressed areas. Pillmore, however, believes that the “true direction and value of these investments” remain in question. He adds that a report from the CBO suggests the act may not have increased the supply of affordable homes. The impact of the NHIA on housing affordability is still debatable, he believes. While neighborhoods may see cosmetic improvements as a result of the NHIA’s implementation, he does not believe that the NHIA will have a lasting effect. With banks and developers poised to garner a larger share of the advantages, the community-centered goals of the act could take a back seat to the financial interests of these stakeholders.

Dual role

Pillmore envisions a conflict of interests emerging as a result of passage of the NHIA.

“Banks undeniably have a critical role in shaping community futures and are pivotal in the housing development ecosystem,” he says. Tax credits like those in the NHIA offer them a way to support housing initiatives while also gaining financial gain. But this dual role can sometimes lead to conflicting interests.

“While banks can significantly impact community development and make homeownership a reality for many, their inherent business model, centered around profitability, can sometimes overshadow community-centric goals. With the NHIA, while banks might play a significant role, the larger question of balance between financial interests and genuine community development remains at the forefront.”

Should the NHIA become reality, a surge in housing activities in earmarked zones seems inevitable. Pillmore says that a fundamental issue still remains. Will the neighborhoods see real and lasting improvements? Will the improvements be nothing more than window-dressing? Will the primary beneficiaries be homeowners, or will they be banks, developers and mortgage companies?

“The NHIA, while promising on paper, reignites a pressing debate,” Pillmore concludes. He says that the debate is about the true essence of affordable housing and who shapes its future.